IR35 for contractors in Orpington and Bromley: a practical guide for limited company contractors

Plenty of IT consultants, engineers, project managers and other specialists living around Orpington, Bromley and Swanley work through their own limited company, often commuting into London or working remotely for clients across the country. If that's you, IR35 is probably the rule you think about most. This guide explains what it is, who decides your status, and the practical steps that help you stay on the right side of it.

What IR35 is

IR35, also called the off-payroll working rules, is aimed at people who work through an intermediary, usually their own personal service company, but who would be an employee of the client if the company wasn't there. If a contract is "inside IR35", the income is taxed broadly like employment income, with income tax and National Insurance deducted. If it's "outside IR35", your company is paid gross and you can take a mix of salary and dividends in the normal way.

The rules apply contract by contract. You can be outside IR35 on one engagement and inside on the next.

Who decides: medium and large clients versus small clients

Since April 2021, the client decides your status if it's a public sector body or a medium or large private sector business. The client must give you a Status Determination Statement explaining its decision and the reasons. If you're inside, the fee-payer (often an agency) deducts tax and National Insurance before paying your company.

If the client is a small private sector business, your own company is responsible for deciding whether IR35 applies and for paying any tax due. A company is generally "small" if it meets two or more of the Companies Act tests on turnover, balance sheet total and staff numbers. Those thresholds were raised for financial years starting on or after 6 April 2025, but because of the way size is assessed for off-payroll working (looking back at earlier years), the earliest most clients will change category for these rules is the 2027/28 tax year. Ask your client which category it falls into rather than assuming.

Clients based wholly outside the UK are also outside the client-led rules, so your company makes the decision in those cases too.

The factors that decide status

There's no single test. HMRC and the courts look at the whole picture, but these points come up again and again:

• Control. Does the client tell you how, when and where to do the work, or just what the end result should be?
• Substitution. Could your company genuinely send someone else, suitably qualified, to do the work? A real, used right of substitution points strongly outside.
• Mutuality of obligation. Is the client obliged to offer you more work, and are you obliged to accept it?
• Financial risk. Do you fix mistakes at your own cost, price by project, or invest in your own equipment and insurance?
• Being part and parcel. Do you manage the client's staff, appear in its org chart or get employee benefits?

The written contract matters, but what actually happens day to day matters more. A contract that says you're independent won't help if in practice you're treated like a member of staff.

Practical steps to protect yourself

• Read every Status Determination Statement. If you disagree, you can ask the client to review it, and it must respond within 45 days.
• Keep the contract, any variations and a short record of how the work is really carried out, such as who set your hours and whether you used your own kit.
• Use HMRC's Check Employment Status for Tax (CEST) tool as one input, but don't treat it as the final answer. It doesn't cover every factor.
• Think about professional indemnity and IR35 insurance, particularly for small-client contracts where your company carries the risk.
• Build up a cash reserve if your status is borderline, so a challenge wouldn't leave the company short.

If a contract is inside IR35

Working inside IR35 through your company isn't always the end of the world, but the numbers change. The fee-payer deducts tax and employee National Insurance and pays employer National Insurance, which may come out of your day rate. Your company can't deduct the usual expenses against that income, and travel to a single client site is unlikely to be claimable. Some contractors compare an umbrella company or a fixed-term employment offer at that point. It's worth running the numbers on your actual day rate before deciding.

If you're outside IR35, the usual limited company rules apply. Corporation Tax is 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between, and you'll want a sensible salary and dividend plan. Keep an eye on your director's loan account too, because drawing money before profits are confirmed can lead to an extra tax charge.

Keeping on top of your company

Contractors often juggle multiple invoices, agency remittances and expenses on the go. Cloud bookkeeping software such as Xero, linked to your business bank account, makes it much easier to see what the company can afford to pay you, set aside Corporation Tax and VAT, and spot problems early.

How Muftals can help

Muftals Accountancy is a chartered firm (ACCA and CIMA) in Chislehurst, working with limited company contractors across Orpington, Bromley, Swanley and SE London. We can review a contract and the working practices behind it, help you challenge a Status Determination Statement, and run your company's accounts, payroll, VAT and Self Assessment so your take-home pay is planned properly.

Book a free first call on 020 7078 7546 or get in touch online. We're open Monday to Friday, 9am to 5:30pm.

This article is general guidance and isn't a status opinion on any contract. IR35 depends on the full facts of each engagement, so take advice before relying on it.